Rock County home construction hits new low

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Sunday, July 10, 2011
— While area homebuilders thought last year’s level of new construction was about as low as it could go, they’re finding a new basement in 2011.

While some have laid off crews, others are climbing out of that basement on a ladder built with residential and commercial remodeling projects.

“Remodeling is certainly carrying the day for us,” said Bob Sarow, owner of Wellnitz & Sarow Builders in Janesville.

In Rock County, the number of residential building permits declined every year since 2003, when the 677 permits pulled were the high point in a period dating back to 1999.

The same holds true in Janesville, where the city issued 312 permits in 2004.

Last year, it issued 49. Through April of this year, builders had pulled just eight permits for new home construction.

In Janesville, Rock County and Wisconsin, the precipitous drop arrived with the Great Recession in late 2007.

“It’s a different world,” said Sarow, who hopes to start building three new houses this fall. “It’s as slow as I’ve ever seen it.

“I was there in the early 1980s when it was supposedly so slow. But that was for a couple years; this is four years now.”

While the recession ended in June 2009, the prospects for a construction turnaround in the near future appear dim, according to a recent survey by the National Association of Home Builders.

“Builder confidence has waned even further as economic growth has stalled, foreclosures have continued to hit the market and the cost of building a home has risen,” said David Crowe, the organization’s chief economist. “Meanwhile, potential new-home buyers are being constrained by difficulty selling their existing homes, stringent lending requirements and general uncertainty about the economy.

“Economic growth must pick up in order for housing to gain the momentum it needs to get back on track.”

Eric Richards, owner of Eric Richards Construction and the president of the South Central Wisconsin Builders Association, agrees.

“It’s extremely hard to compete with the existing home market,” Richards said. “The cost of materials is going up, which is globally driven because so much of our product is globally driven.”

Still, he sees signs of economic encouragement. A couple of companies have announced intentions to open in Rock County, and a handful of others are expanding.

“It will take jobs to turn this around,” he said.

Sarow agreed that the glut of existing homes at affordable prices is tough competition for homebuilders.

“People come in and say, ‘Tell me why I should build when I can buy so much cheaper?’” Sarow said. “There are a lot of reasons why they should build, but right now it’s tough to compete on price.

“A bigger problem is the number of vacant lots. If you can’t sell the lot, you can’t build a house.”

Fix it or expand it

In the meantime, several homebuilders have become home remodelers.

In Janesville, the number of permits for significant alterations or addition was 18 percent higher in 2010 than it was the year before.

“A lot of people are retrofitting their houses to meet their needs,” Richards said. “With so many houses on the market, people see what kind of financial hit they’re going to take and decide its best to spend money on their homes and stay there.”

Homebuilders have responded, Richards said, but it’s not exactly a novel strategy.

“That market has gotten very competitive,” he said.

Richards also owns Janesville Plumbing, which he said has become aggressive on the service side.

“Things will come around on the residential construction side, but we just have to figure out ways to hang on and make ends meet,” he said.

Doing just fine, thanks

As the owner of a small construction company, Joe Sagona has an economic advantage that many of the larger builders don’t.

He, his sons and his one full-time employee build houses from start to finish, one at a time. He doesn’t have multiple crews that require multiple jobs that are hard to come by in a tough economic climate.

“While things have been pretty dismal for a lot of guys, we have been busy,” said Sagona, who owns the Beloit-based Sagona Construction. “We never experienced the downturn that so many builders did.

“I’m always getting calls, and I’ve never advertised in 10 years. I’ve had so many opportunities to get bigger, but that could create big problems when the economy is bad.”

Sagona usually builds two houses a year, and he just started a large house that should occupy his time through Thanksgiving.

Others are in line to have him build houses next year.

“We are also into the remodeling, and I try to schedule all of that in between the houses,” he said. “We did a lot of additions last year for people who decided they couldn’t sell and were going to stay where they were.”

Sagona’s work takes him all through Rock County and into northern Illinois.

Sarow’s crews are traveling as well. He’s been able to keep his carpenters fully employed for the last three years, and there’s work for the foreseeable future.

But most of it is in Beloit, outlying parts of Rock County and in Dane County.

“Right now, it’s not really happening in Janesville,” he said.

Last updated: 5:56 pm Thursday, December 13, 2012

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